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CFO of a European ecommerce logistics unicorn on the on-demand value chain

Nan Wang


  1. Comparing the traditional supply chain, dark stores can do more direct procurement, which at least cut through a few distribution layers. What kind of efficiency improvement do you see in this new supply chain?
  2. What do you think about scaling this hyper-local operation?
  3. Who do you think will capture the majority of the value chain?
  4. Is there anything that you think is important about this online grocery that we haven't talked about?


Comparing the traditional supply chain, dark stores can do more direct procurement, which at least cut through a few distribution layers. What kind of efficiency improvement do you see in this new supply chain?

It’s less about operating efficiency in the last mile, it's middle mile efficiency. That’s what going to make you get some margin out of a delivery.

If you are a logistic operator, it's not only picking up, but you also need to centralize all of that goods somewhere. So you might have a warehouse and long hauls that pick up the goods and putting them all together in one place.

If you get enough volumes for those tracks to be full, then you are efficient, otherwise the cost per parcel of any single good it's going to be very high. So in terms of operating efficiency, it's not only the last mile, it's the step earlier.

Just a super high-level P&L for a last-mile operator, they can spend maybe 40 -45% of sales on the last mile. That's a lot. I would say even 50% last-mile cost, but then the other 50%, what makes you gain some positive or negative margins is the middle mile, which is how you collect, how you centralize and how you do the picking and the packing, which is something that can make the difference.

It is difficult to say how much a cost-saving is possible in cutting out some of these distribution layers because they have different capacities and they are flexible and variable. If the van is under-utilized, you are going to be paying for something you're not delivering.

One of the important things to me is just to have a proper network of different services, so you can move quickly from one small van to a mid-sized vehicle, to a big vehicle when it's needed and try to have the minimum commitment as well.

So having different options and trying always to know your demand as best as possible, and as early as possible, is something difficult.

If you have higher accuracy, you can be better at planning your resources. If you are quick enough, you can be more efficient in terms of operations.

Also, if you try to erase the middle distribution, then you will have to be willing to acquire higher volumes, higher amounts to get more margin and lower prices, but then you are running the risk with the stocks, especially, fresh groceries are perishable.

What do you think about scaling this hyper-local operation?

There could be network effects with enough density. What I think they are doing now is offering new business models that can make them even more efficient. Not only you would deliver at lunchtime and dinner time, but also, between those times you would be delivering groceries and e-commerce. As a result, your drivers are going to be super busy, then you can get much lower rates; whereas now, you have to pay €2 - 2.50 or even €3 per delivery because the guys can only do two drops per hour.

Otherwise, it doesn't make any sense. I spent hours in the street waiting for my phone to ring, I will pick up a meal and deliver it. I will make € 2 – 3.5. But instead of waiting there, I'm just delivering some other stuff, I'm going to make €1 per delivery, but at the end of the day, I'm making more money.

Who do you think will capture the majority of the value chain?

Some European brick-and-mortar retailers struggle with e-commerce a lot. So having a partnership, someone that handles that traffic online, it's going to be much better for them. So I think at some point it will be like a huge fight to become the best partner possible of those retailers.

Imagine, instead of for hotels, it’d be for supermarkets or just other retailers, these suppliers will all want to go with that one that is managing or handling the most traffic. For instance, there's a very interesting business model that it's called Simpler Life. Simpler is life as a service. They don't just stop at groceries. They go much farther. They try just to give you access to any single service or subscription through the application, so you can even get your furniture, your PlayStation, your TV, or whatever can generate traffic because they know at some point that the traditional shopping experience is going to change completely.

I think the competition is fierce. And I think the one that manages the traffic is the one that will manage the market. The one that will capture the most value of the whole transaction, which is something dangerous, because then, the suppliers wouldn’t have a real incentive to provide the best quality, if we believe the way of buying is more important than what you are buying. 

When I think about our logistic business, what I'm missing the most is the traffic. I've got the traffic because someone else is giving it to me, but I'm not making an impact on the demand.

I create some higher recurrence because my delivery experience is great, but I'm not the one that makes people buy more or buy differently.

Marketplaces have acquired the demand side and now they are moving into the supply side with the dark store and dark kitchens. They will be capturing that value because they are getting more vertically integrated than before.

Is there anything that you think is important about this online grocery that we haven't talked about?

The most interesting thing is how to handle the traffic. I don't know if it's more important just to be efficient in the last mile or just having an application that it's so easy, having such a good customer experience, and I know in terms of prices and services, there's this application, like it's wow, I can order a burger, I can order something else and I can just do my groceries. I don't know they are going to be delivered in a very, in a record time with a great experience and they are going to be giving the best prices.

Traffic and prices for me are the key factors for building these reliable relationships.

Because if you realize that you are overpaying something, then you will stop using that. But instead of that, you see buying through this app, you are getting exactly the same price as going to the supermarket. Then, more likely people would order online because time is valuable.

There's a big challenge when you are buying groceries online. When you go to a supermarket, you decide if there's something that it's not there, then you can decide to take something different or not.

But when they have to deliver, sometimes they warn you in advance, but sometimes they bring you something. That can also be misunderstood by the final customer.

So my feeling is the online user when doing groceries is also very, very demanding. So it's tough. The user experience, the stock management, then obviously the last mile operations and then to meet the expectation of the final user.


This transcript is for information purposes only and does not constitute advice of any type or trade recommendation and should not form the basis of any investment decision. Sacra accepts no liability for the transcript or for any errors, omissions or inaccuracies in respect of it. The views of the experts expressed in the transcript are those of the experts and they are not endorsed by, nor do they represent the opinion of Sacra. Sacra reserves all copyright, intellectual property rights in the transcript. Any modification, copying, displaying, distributing, transmitting, publishing, licensing, creating derivative works from, or selling any transcript is strictly prohibited.

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